Independent contractor

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An independent contractor is an individual, a business, or a company that provides goods or services to another entity under the conditions specified in the contract or in an oral agreement. Unlike an employee, an independent contractor does not work regularly for an employer but works when needed, during which time he may be subject to agency law. Independent contractors are usually paid freelance. Contractors often work through limited companies or franchises, which they own, or can work through umbrella companies.

In the United States, any company or organization involved in a trade or business that pays more than $ 600 to an independent contractor within one year shall report this to the Internal Revenue Service (IRS) and also to the contractor, using Form 1099-MISC. This form is only a report of the money paid; independent contractors do not have withholding taxes such as ordinary employees.

Video Independent contractor

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The distinction between independent contractors and employees is important in the United States, as the costs for business owners to retain employees are significantly higher than the costs associated with hiring independent contractors, due to federal and state requirements for employers to pay FICA (Social Security and Tax Medicare) and unemployment taxes on income received for employees. Similarly, employees are protected from being fired without cause, and if fired or left for other reasons are entitled to unemployment benefits, whereas independent contractors have no protection or rights. Employees are also entitled to overtime pay for work performed over the standard 40 hours per week, while independent contractors can work regardless of the number of hours (including well above this standard) without wage changes.

In the early 1990s, the IRS methodically began looking for employers who misrepresented employees as independent contractors, and have since earned billions of dollars in Jamsostek taxes. Recently, worker classification initiatives have been a top priority for the IRS, the Department of Labor, and state agencies. In 2011, the IRS and the Department of Labor signed a memorandum of understanding in an effort to jointly improve the misclassification of workers.

The United States Supreme Court has offered the following guidelines to distinguish employees from independent contractors:

The IRS, for federal income taxes, applies the "right to control the test" which considers the nature of the employment relationship. They highlighted three general aspects of job settings:

1. financial control
2. behavior control
Relationships
3. between the parties

In general, their criteria are parallel to the Supreme Court in sentiment. They include guidelines such as number of instructions, training, integration, use of assistants, length of professional relationship, work order, work location, payment schedule, source of funds for business expenses, the right to quit, and more typical financial risks. visible with each job category. Within their framework, independent contractors maintain control over schedules and working hours, jobs received, and performance monitoring. They can also have large investments in equipment, provide their own inventory, provide their own insurance, repairs, and other expenses related to their business. They can also perform unique services that are not in the normal business trip of the employer. This contrasts with the employees, who usually work on the schedule requested by the employer, and whose performance is employed directly by the employer. Independent contractors can also work for many companies, and offer their services to the general public.

The distinction between independent contractors and employees is not always clear, and continues to grow. For example, some independent contractors may work for a number of different organizations throughout the year, while others maintain independent contractor status even though they work for the same organization throughout the year. Other companies, for example in the freight transport industry, set schedules for independent contractors, require the purchase of vehicles from companies and prohibit work for other companies.

In July 2015, the US Department of Labor issued new guidelines on misclassification of employees as independent contractors. "An employee who is economically dependent on an employer suffers or is permitted to work by an employer, thereby applying a test of economic reality given the broad definition of" hiring "under the Act, the majority of workers are employees under the Fair Labor Standards Act."

... the economic reality of the relationship, and not the label given by the employer, is decisive. Thus, an agreement between an employer and an employee appointing or labeling a worker as an independent contractor does not indicate the economic reality of the employment relationship and is irrelevant to the analysis of the status of the worker.

Maps Independent contractor

Certain jobs

Examples of occupations where independent contractor arrangements are typical:

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Advantages and disadvantages

An independent contract has benefits and losses to the contractor.

Benefits

• Because they are rarely tied to their employers, they are free to set their own business rules, limited only by bargaining power.
• Since they typically develop large client networks, losing one or two often have a negligible effect.
• Many people love the idea of ​​"being your own boss." In addition to materialistic benefits, many people just enjoy not having to answer to a supervisor.
• As any artist/author of any artwork, such as painting, sculpture, photographs or papers, a person is entitled to proprietary copyright if they create the work as an independent contractor. If the person creates these works while using another person or company, those rights belong to the employer (under most standard employment contracts).

Companies in a share economy such as Uber can gain substantial profits through employee misclassification as independent contractors.

Losses

• In the United States, the Internal Revenue Service computer algorithm matches individuals with Form 1099 for the companies that pay for it. If an independent contractor reports more than $ 10,000 in revenues, or most income from a single source, the IRS will likely question the independence of workers, and investigate companies issuing Form 1099.
• Employee employee classification mistakes as an independent contractor either accidentally or to avoid taxation and regulation, is widespread. In addition, contractorization has been used as an indirect form of union-busting.
• An independent contractor can be a business with employees; however, in many cases in the United States an independent contractor operates as a sole proprietorship or a limited liability company with a single member. This means that an independent contractor, as a business owner, incurs his own expenses to provide contract services, must obtain his own equipment for service, and be responsible for business submissions such as income tax returns.
• Independent contractors are responsible for their own self-employment tax, which consists of both parts of the FICA tax amount. An employee only pays the employee's share of the FICA tax. The entrepreneurial tax is not withheld from the income of an independent contractor who is required to voluntarily declare and pay the estimated income tax to the IRS, which may cause a trap for contractors who are experiencing financial difficulties and are tempted to delay making the required tax payment estimate.
• There are some monetary incentives that are guaranteed to employees in the United States, but not independent contractors. Examples include workers' compensation and unemployment insurance; however, independent contractors are allowed to make contributions to the Individual Retirement Account.
• In many jurisdictions, safety and health regulations are less comprehensive for independent contractors.

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Standalone contract in lawsuit

Employers of independent contractors are generally not responsible for the painful actions and omissions of contractors, since the controls and controls found in employer-employee or principal-agent relationships are not available. However, the responsibilities of the representatives will apply in some circumstances:

1. where the contractor injures the person invited to the real property of the employer,
2. the contractor is engaged in a very dangerous activity (likely to cause considerable injury, such as explosives with explosives), or
3. The employer is prohibited from denying obligations because he has detained an independent contractor as if he were just an employee or an agent.
4. the employer is engaged in an operation that is subject to the obligations imposed by the public authorities

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Alternative

Because of the higher costs of retaining employees, many companies that require transition from independent contractors to employees may find it difficult to switch. There is a transitional status for employees as an alternative to an independent contract known as an employee under the law. Statutory employees are cheaper to hire than classical employees because employers do not have to pay unemployment taxes. However, they are more expensive than independent contractors because Social Security and Medicare taxes must be paid on wages. Similarly for independent contractors, employees are required to cut their trade or business costs from their W2 revenue.

Dependent contractor

More and more workers do not fit into the government categorization of independent contractors and employees under the law, and are increasingly classified as dependent contractors. Some of these indefinite workers - independent contractors, temporary workers, and part-time workers who work when and for how long they want, like those who work for companies like Uber, Handybook, Inc., and CrowdFlower - have filed a lawsuit that states that companies that substantially control work and worker behavior (as in Handybook, Inc.: when to knock on the customer door vs. ringing the doorbell, and how to use the customer's bathroom) must be covered with minimum wage and overtime rules under the Law legislation of Fair Labor Standards, as well as receiving protection of other traditional employees. Wilma Liebman, former chair of the National Labor Relations Board, has observed that Canada and Germany have such protection in place for contingent workers. And British Prime Minister David Cameron has appointed a supervisor for freelance workers in the country, to determine how the government should support freelance workers.

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See also

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References

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External links

• Right of Independent Contractor
• Independent Contractor vs. Employee - IRS (USA)
• "Individual Entrepreneurs" - IRS (USA)
• "Standard Implementation of Forced Standard or Permit" Fair Employment Standard in Employee Identification Not Classified as Independent Contractor. " US Department of Labor (PDF)

Source of the article : Wikipedia